A do-almost-nothing budget was promised, and Finance Minister Jim Flaherty more than delivered. Much of the document, and much of Mr. Flaherty’s speech, was devoted to retelling familiar history: Canada’s record of postrecession economic recovery, which has been the least anemic among major industrialized countries. There was also the promise of the future: This budget is setting up Canada, and the Conservative government, for some big moves a year from now, in 2015. Barring economic catastrophe the deficit will be eliminated, and this government will find itself heading into an election with deep pockets, a burgeoning surplus and lots of options.
But as for the present? In the context of $280-billion a year in federal spending, almost everything announced on Tuesday was small enough to be a rounding error. There is nothing big, little surprising and not much new.
If you’re a smoker, this budget will hurt, hitting you with higher cigarette taxes. If you’re an apprentice in the trades, it will help, with interest-free student loans. There’s modest new spending on training for people with disabilities. There’s money for the on-reserve native education system. There are also small reductions in defence spending over four years, though Mr. Flaherty insisted this was simply a shifting of spending to later years, acknowledging problems with defence procurement.
The biggest measure in the largely autopilot budget? If you’re a retired federal public servant, you’re about to get pinched. Ottawa currently picks up 75 per cent of the tab for the health-care premiums of retired civil servants; the budget reduces Ottawa’s share to 50 per cent. That will cost each retiree several hundred dollars a year, and save Ottawa $7.4-billion over six years. Pensioned-off government employees will scream. For almost everyone else, this budget is a snore.
And then there’s the coming year’s projected deficit. It isn’t even a rounding error. It’s pretty much of an accounting fiction. The government puts a cushion of prudence worth $3-billion into every budget. The money isn’t allocated to anything; it’s just a notional placeholder. Next year’s projected deficit is $2.9-billion. Take away the $3-billion safety blanket, and the deficit disappears.
Many economists had predicted that Jim Flaherty would be able to balance the budget a year ahead of his own target date of 2015. That’s looking extremely likely, despite an economy that remains weak and barely grew in 2013. Again: nothing new, no surprises.
As per the pattern of this government, there’s also lots of pandering to constituencies large and small. A promise to force telcos to lower cellphone roaming rates? It’s in the budget. Reminding us of last year’s pledge to prohibit banks, cable and phone companies from charging you for a paper bill? Check. Promising “legislation to address the price gap between identical goods sold in Canada and the United States”? It’s there, too. Who knows what it means or how it will work, but Mr. Flaherty put it on his laundry list of consumer-friendly vagaries. Once upon a time, these were not the sorts of things governments put into budgets. And once upon a time, these were the sorts of market interferences that Conservatives and conservatives opposed.
On the face of it, budget 2014 looks like a bit of an empty case. But there’s more to the story. Over the past half-decade, the Conservatives have engineered a steady reduction in the deficit and the size of government. This budget is one more chapter in the slow but substantial transformation of the federal government’s scope and role. Ottawa under the Conservatives is getting smaller. Program spending as a percentage of the economy is steadily declining. After spiking in the recession, when the coffers were wisely opened, and the deficit was run up to stimulate the economy, the relative size of government has steadily declined. This year, federal spending is set to return to the prerecession low of 13 per cent of GDP. By 2018, federal spending on everything other than debt service will be 12.4 per cent of the economy – the lowest level in at least 50 years.
This is the small-c conservative philosophy of the Conservative Party in action. It should cheer their base; it will outrage many opponents. It also sets the country up for the next election. It raises real issues for Canadians, and should provoke national debate. Ottawa spends less, but it also does less. Is that a virtue or a problem? Do you want your government to do more – or do you want it to do less, and give you back the difference in the form of lower taxes?
And Ottawa is about to be able to do a lot more – or give back a lot more. Absent any new tax or spending measures, the government expects to record a surplus of $6.4-billion in 2015-16, rising to more than $10-billion by 2018. The government could cut taxes, create new spending programs, bulk up funding for existing programs, or some combination of all of the above. What do Canadians want? The 2015 election will turn on the answer to that question.